New orders expansion sent Index higher
New orders was the fastest expanding component in February. During the month five of the six components expanded.
Surprise expansion in new orders results in improved backlogs
February’s expansion in new orders resulted in growing backlogs. Strong growth in new orders often has an immediate or at times slightly delayed effect on production and backlogs.
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The February GBI: Composites Index rebounded from January’s recent low. The latest reading is 8.8 percent lower compared to the same month one year ago, when the Composites Index was approaching an all-time high in early 2018. Gardner Intelligence’s review of the underlying data indicates that the Index was propelled higher during the month by new orders, production, supplier deliveries and employment. The Index — calculated as an average — was pulled lower by backlogs and exports. Of all the components, only exports contracted during the month.
February marks the first time in nearly a year that that new orders expanded faster than any other component. When the Index experiences a significant expansion in new orders, there are often immediate as well as delayed effects to the other components. As experienced during the month, the relatively faster growth in new orders as compared to production resulted in an immediate increase in backlogs. Gardner will be monitoring production and supplier deliveries in the coming months to assess any delayed affects to the Index resulting from the current change in new orders.